Focus: WHO woes and EU’s proposed additional rescue package

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Updated 19 May 2020
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Focus: WHO woes and EU’s proposed additional rescue package

What happened:

Markets rallied on three pieces of news and one shift in fundamentals. The S&P 500 was up by 3.2 percent, reaching its highest level since early March. The Hang Seng and the TOPIX were up 2.1 percent and 1.7 percent, respectively.

US Federal Reserve chair Jerome Powell reaffirmed that the Fed would use the full range of tools to deal with the recession and that interest rates would stay close to zero until the economy is back on track. French President Emmanuel Macron and German Chancellor Angela Merkel proposed a €500 billion package to be processed through the EU budget. Moderna reported positive results in early testing of its COVID-19 vaccine. The company hopes to enter phase three of clinical tests in July. Moderna shares soared. Health-care analysts warn that these are early days in terms of drug development.

Oil markets seem to be over the worst, because supply has contracted sharply due to massive cuts and demand growth exceeded expectations, as economies come out of lockdown. On May 10 the WTI June contract will expire. There is currently no danger of WTI turning negative, as it did wen the May contract expired on April 20.

US President Donald Trump threatened to make permanent the current temporary freeze of US contributions to the World Health Organization (WHO), unless the organization reformed within 30 days as well as canceling US membership.

UK employment numbers for first quarter showed job gains of 50,000. The unemployment rate was 3.9 percent, reflecting that UK only went into lockdown at the end of March. In April, 856,500 people filed for jobless claims, which indicates that many employers did not take advantage of the country’s work support scheme opting to fire staff rather than furlough them.  

Background:

President Trump has voiced his discontent with the way China and the WHO handled the coronavirus outbreak many times. However, there might be more than the progression of the US-China rivalry and election soundbites behind US discontent with the WHO.

On Monday, China’s President Xi Jinping addressed the WHO general assembly and pledged $2 billion in aid to the pandemic health response. He stressed that any COVID-19 vaccines be made available to all and advocated for the preservation of international supply chains. The latter is in China’s national interest given the country’s pre-eminence in the pharmaceutical supply chains.

Making a vaccine available touches on intellectual property and pricing. The US, along with the UK, Switzerland and Japan, is concerned about the WHO’s so-called 2001 Doha Declaration whereby governments can overrule intellectual property rights in a public health emergency. The pharmaceutical and biotech industries contribute significantly to the gross domestic product (GDP) of the aforementioned countries and they would like to rely on voluntary measures instead of the Doha Declaration.

Macron and Merkel agreed to support a €500 billion coronavirus relief package. Funnelled through the EU budget, it will be distributed in the form of grants rather than loans, which is important when calculating the debt-to-GDP ratios in southern rim countries.

This is new money and the EU Commission could use its AAA rating to raise the funds on the international bond markets. The repayment obligation would be shared by all 27 EU member states.

It is significant that the EU’s two largest economies collaborated on the proposal and that fiscally prudent Germany stands behind it. Merkel emphasised the need for action, saying: “There is a risk that the EU’s cohesion will be endangered by the economic effects of this virus.”

The package will have to be discussed among the EU 27. Austrian Chancellor Sebastian Kurz has already voiced criticism and the Netherlands as well as other fiscally prudent northern countries may follow suit, fearing that the proposal was too close to the mutualization of debt and might lead to common fiscal frameworks. Do not expect passage of the package to be uncontested or easy.

Where we go from here:

The UK Department of International trade announced its post-Brexit tariff plan. Zero percent on imports would come in tariff free as opposed to a current 47 percent. A total of £30 billion of tariffs on supply chains would be removed.  A 10 percent tariff on cars as well as protection for agricultural goods would remain. The government will remove items on goods promoting a green economy.

— Cornelia Meyer is a Ph.D.-level economist with 30 years of experience in investment banking and industry. She is chairperson and CEO of business consultancy Meyer Resources.
Twitter: @MeyerResources


New explosive wildfire erupts near Los Angeles

Updated 3 min 30 sec ago
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New explosive wildfire erupts near Los Angeles

  • Meteorologists say strong winds and low humidity create conditions ripe for rapid fire spread

CASTAIC, United States: A new wildfire erupted north of Los Angeles on Wednesday, exploding in size and sparking orders for tens of thousands of people to evacuate in a region already staggering from the effects of huge blazes.
Ferocious flames were devouring hillsides near Castaic Lake, spreading rapidly to cover more than 5,000 acres (2,000 hectares) in just a few hours.
The fire was being fanned by strong, dry Santa Ana winds that were racing through the area, pushing a vast pall of smoke and dangerous embers ahead of the flames.
Evacuations were ordered for 31,000 people around the lake, which sits around 35 miles (56 kilometers) north of Los Angeles, and close to the city of Santa Clarita.
“I’m just praying that our house doesn’t burn down,” one man told broadcaster KTLA as he packed his car.
The fire came with the greater Los Angeles area still suffering after two enormous fires that killed more than two dozen people and destroyed thousands of structures.
Robert Jensen, of the Los Angeles County Sheriff’s Department, urged everyone in the impacted area of the new blaze — dubbed the Hughes Fire — to leave immediately.
“We’ve seen the devastation caused by people failing to follow those orders in the Palisades and Eaton fires,” he said.
“I don’t want to see that here in our community as well. If you’ve been issued an evacuation order, please get out.”
Television footage showed police driving around neighborhoods urging people to leave.
Los Angeles County Sheriff Robert Luna said the Pitchess Detention Center in Castaic was under an evacuation order, and around 500 inmates were being moved to a neighboring facility.
He told broadcaster KCAL9 that around 4,600 inmates being held at other jails in the area were sheltering in place, but buses were on hand in case conditions changed and they needed to be moved.
Melissa Camacho, an attorney with the American Civil Liberties Union, noted the rights group’s opposition to “the expansion of the jail system especially in dangerous fire zones,” adding that “we are gravely concerned for the safety of people incarcerated in those jails.”
California Highway Patrol said the fire was impacting traffic on the I5 freeway, with a section of the road — which runs the length of the US West Coast — shuttered.
Helicopters and planes were on the scene dropping water and retardant on the blaze.
That fleet included two Super Scoopers, enormous amphibious planes that can carry hundreds of gallons (liters) of water.
Crews from Los Angeles County Fire Department and Angeles National Forest were also attacking the blaze from the ground.
California Governor Gavin Newsom, who has been the target of criticism by President Donald Trump over his handling of the Los Angeles fires, said he had ordered officials into action.
“State resources have been deployed to the Hughes Fire in the Angeles National Forest to assist in the federal response,” he said.
“We will continue to monitor the situation closely and provide the federal government with whatever it needs to extinguish this fire.”
It was not immediately clear what sparked the fire, but it occurred during red flag fire conditions — when meteorologists say strong winds and low humidity create conditions ripe for rapid fire spread.
Human activity, including the unchecked burning of fossil fuels, is changing Earth’s climate, increasing average global temperatures and altering weather patterns.
Even though January is the middle of the region’s rainy season, Southern California has not seen any significant precipitation in around eight months, leaving the countryside tinder dry.


Nearly 6 million Somalis need aid this year: UN

Updated 8 min 53 sec ago
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Nearly 6 million Somalis need aid this year: UN

  • he country is currently facing “widespread dry conditions following poor October to December rains,” says UN humanitarian agency OCHA said

UNITED NATIONS: Nearly six million people in Somalia, almost a third of the country’s population, need humanitarian aid this year, the United Nations said Wednesday as it launched a $1.43 billion funding appeal.
The Horn of Africa nation is one of the world’s poorest, enduring decades of civil war, a bloody insurgency by the Al-Qaeda-linked Al-Shabab, and frequent climate disasters.
“Somalia continues to face a complex, protracted humanitarian crisis,” a statement from the UN humanitarian agency OCHA said, citing a range of issues from conflict to “climate shocks.”

The country is currently facing “widespread dry conditions following poor October to December rains,” OCHA said.
The funding appeal launched Monday with the Somali government aims “to support some 4.6 million of the most vulnerable people in the country,” it added.


White House says Yemen’s Houthi movement designated as ‘foreign terrorist organization’

Updated 35 min 47 sec ago
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White House says Yemen’s Houthi movement designated as ‘foreign terrorist organization’

  • The Houthis’ activities threaten the security of American civilians and personnel in the Middle East, the White House says

WASHINGTON: US President Donald Trump on Wednesday designated Yemen’s Houthi movement, known formally as Ansar Allah, as a “foreign terrorist organization,” the White House said in a statement.
The move imposes harsher penalties than the Biden administration had applied to the Iran-aligned group in response to its attacks on commercial shipping in the Red Sea and against US warships defending the critical maritime chokepoint.
“The Houthis’ activities threaten the security of American civilians and personnel in the Middle East, the safety of our closest regional partners, and the stability of global maritime trade,” the White House said in a statement.
US policy, it said, would be to work with regional partners “to eliminate Ansar Allah’s capabilities and operations, deprive it of resources, and thereby end its attacks on US personnel and civilians, US partners, and maritime shipping in the Red Sea.”


Europe posts record year for clean energy use as Trump pulls US toward fossil fuels

Updated 23 January 2025
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Europe posts record year for clean energy use as Trump pulls US toward fossil fuels

  • With another 24% of electricity in the bloc coming from nuclear power, nearly 3/4 of EU's electricity is considered clean energy
  • In contrast, economic giants China and the US still get nearly 2/3 of their energy from carbon-polluting fossil fuels like coal, oil and gas

A record 47 percent of the European Union’s electricity now comes from solar and other renewables, a report Thursday said, in yet another sign of the growing gap between the bloc’s push for clean energy and the new US administration’s pursuit of more fossil fuels.
Nearly three-quarters of the EU’s electricity doesn’t emit planet-warming gases into the air — with another 24 percent of electricity in the bloc coming from nuclear power, a report released by the climate energy think tank Ember found. This is far higher than in countries like the United States and China, where nearly two-thirds of their energy is still produced from carbon-polluting fossil fuels like coal, oil and gas. Around 21 percent of the US’s electricity comes from renewable sources.
Experts say they’re encouraged by Europe’s fossil fuel reductions, particularly as the US looks set to increase its emissions as its new president pledges cheaper gas prices, has halted leases for wind projects and pledged to revoke Biden-era incentives for electric vehicles.
“Fossil fuels are losing their grip on EU energy,” said Chris Rosslowe, an energy expert at Ember. In 2024, solar power generated 11 percent of EU electricity, overtaking coal which fell below 10 percent for the first time. Clean wind power generated more electricity than gas for the second year in a row.
Green policies and war drive clean energy growth

Illustration courtesy of EMBER

One reason for Europe’s clean power transition moving at pace is the European Green Deal, an ambitious policy passed in 2019 that paved the way for climate laws to be updated. As a result of the deal, the EU made their targets more ambitious, aiming to cut 55 percent of the region’s emissions by the end of the decade. The policy also aims to make Europe climate neutral — reducing the amount of additional emissions in the air to practically zero — by 2050.
Hundreds of regulations and directives in European countries to incentivize investment in clean energy and reduce carbon pollution have been passed or are in the process of being ratified across Europe.
“At the start of the Deal, renewables were a third and fossil fuels accounted for 39 percent of Europe’s electricity,” Rosslowe said. “Now fossils generate only 29 percent and wind and solar have been driving the clean energy transition.” The amount of electricity generated by nuclear energy has remained relatively stable in the bloc.
Russia’s invasion of Ukraine has also spurred the move to clean energy in Europe. Gas prices skyrocketed — with much of Europe’s gas coming from Russia becoming unviable — forcing countries to look for cheaper, cleaner alternatives. Portugal, Netherlands and Estonia witnessed the highest increase in clean power in the last five years.
Europe cements its place as a clean energy leader
The transition to clean power helped Europe avoid more than $61 billion worth of fossil fuel imports for generating electricity since 2019.
“This is sending a clear message that their energy needs are going to be met through clean power, not gas imports,” said Pieter de Pous, a Brussels-based energy analyst at European think tank E3G. De Pous said the EU’s origins were “as a community of coal and steel because those industries were so important,” but it is now rapidly becoming a “community of solar and wind power, batteries and smart technologies.”
Nuclear growth in the bloc, meanwhile, has slowed. Across the European Union, retirements of nuclear plants have outpaced new construction since around the mid-2000s, according to Global Energy Monitor.
As President Trump has pulled the United States out of the Paris Agreement aimed at curbing warming and is pursuing a “drill, baby, drill” energy policy, Rosslowe said the EU’s leadership in clean power becomes all the more important. “It’s about increasing European energy independence, and it’s about showing this climate leadership,” he said.
On Tuesday, EU chief Ursula von der Leyen said: “Europe will stay the course, and keep working with all nations that want to protect nature and stop global warming.”
 


Saudi crown prince makes call to US president Trump

Updated 23 January 2025
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Saudi crown prince makes call to US president Trump

RIYADH: Saudi Arabia’s Crown Prince Mohammed bin Salman made a phone call on Wednesday to US President Donald Trump, the Saudi Press Agency said.

During the call, the Crown Prince congratulated Trump and conveyed the congratulations of King Salman to the president after being sworn in, wishing the American people further progress and prosperity.

The pair discussed bilateral cooperation to establish peace, security and stability in the Middle East, in addition to enhancing bilateral cooperation to combat terrorism.

The Crown Prince pointed out the ability of the president's administration, with its expected reforms in the US, to create unprecedented economic prosperity, which the Kingdom seeks to benefit from its available opportunities for partnership and investment.

He stressed the Kingdom's desire to expand its investments and trade relations with the United States in the next four years by an amount of $600 billion, which is expected to increase if additional opportunities become available.

Trump expressed his thanks and appreciation to the King and Crown Prince for their congratulations, stressing his keenness to work with the Saudi leadership on everything that would serve their common interests.